2015 AUTOMOTIVE AFTERMARKET MERGERS AND …

2015 AUTOMOTIVE AFTERMARKET MERGERS AND ACQUISITIONS

YEAR IN REVIEW AND OUTLOOK

BB&T Capital Markets is a division of BB&T Securities, LLC, member FINRA/SIPC. BB&T Securities, LLC, is a wholly owned nonbank subsidiary of BB&T Corporation. Securities or insurance products and annuities sold, offered or recommended are not a deposit, not FDIC insured, not guaranteed by a bank, not guaranteed by any federal government agency and may go down in rmation contained herein has been obtained

from sources we believe to be reliable and accurate, but we do not guarantee its accuracy or completeness. This material is not to be considered an offer or solicitation regarding the sale of any security. ? 2016, Branch Banking and Trust Company. All rights reserved.

Introduction

BB&T Capital Markets ("BB&T") and the Automotive Aftermarket Suppliers Association ("AASA") are pleased to bring you the 2015, and fifth annual, Automotive Aftermarket M&A Overview. This publication, which is a collaboration between BB&T and AASA, is intended to serve as a review of notable deals and deal trends in the automotive aftermarket in 2015. It also looks forward to the deal market in 2016 and beyond.

Transactions have played and will continue to play an increasingly important role in the transformation of the aftermarket. Deals have the power to change the market, alter the customer base, and challenge companies' competitive positions. The aftermarket provides investors, whether strategic or financial, with above market returns for what is otherwise below market risk. Couple this with what is still a very fragmented aftermarket and we anticipate M&A deal volume will remain strong.

This publication is an effort by BB&T and AASA to ensure that companies in the aftermarket ? and the investors behind them ? understand what is happening in the market and stay ahead of the curve on transaction trends.

Thank you,

Joseph N. Sparacino

Senior Vice President Head of Aftermarket Investment Banking Practice

BB&T Capital Markets 617.316.1334 jsparacino@

BB&T Capital Markets is the leading investment bank to the aftermarket. The firm provides unparalleled industry expertise with best-in-class transaction execution. BB&T Capital Markets has the longest-tenured aftermarket practice on Wall Street, and offers merger & acquisition advisory, capital raising, and a full suite of investment banking services to the entire aftermarket channel and in every segment of the industry.

Jay Burkhart

Vice President Chief Strategy Officer Automotive Aftermarket Suppliers Association 919.406.8846 jburkhart@

The Automotive Aftermarket Suppliers Association exclusively represents the North American Aftermarket supplier industry. AASA and its parent MEMA is recognized as one of the nation's strongest and most prominent trade organizations with more than 100 years of experience. AASA's sole mission is to help its members, the aftermarket suppliers, to be more profitable, innovative, and competitive on a global scale.





1

Table of Contents

Overview of U.S. M&A Activity Automotive Aftermarket Commentary Select 2015 Aftermarket Trends and

Observations Commentary What to Expect in 2016 Appendix: Public Aftermarket Metrics &

Select 2015 Aftermarket Transactions

2

The U.S. M&A Market Hit New Multi-Year Highs in 2015

2015 saw a new high in the number of M&A deals closed

- Buyers, both strategic and financial, remain flush with cash, and continue to pursue acquisitions aggressively - Strategic buyers continue to use M&A to expand market share and drive growth - Although the Federal Reserve began to raise interest rates during the fourth quarter, rates remain near

historic lows and debt availability supports continued high levels of leverage - Elevated levels of dry powder and cheap financing are driving financial sponsors to aggressively pursue

quality acquisition targets and allowing firms to offer more competitive bids

In the U.S., there were 12,880 M&A transactions across all industries in 2015

- 2015 deal volume outpaced 2014 by 8.1%, as improving macroeconomic dynamics and favorable lending conditions emboldened acquirers

- Private equity continues to play an active role in the middle market, having a positive and increasingly important impact on the number of M&A deals

Number & Value of Total U.S. Transactions

(For transactions with disclosed value)

# of Deals

1,600 1,400 1,200 1,000

800 600 400 200

?

1,288

1,464 1,391

1,086

296 310 217 193

163 158 222 203

257 234 334 292

514 526 418 367

853

773

753

615

$1 billion +

$500m to $1 billion

$250m to $500m

$100m to $250m

2012 2013 2014 2015

$25m to $100m

Under $25m

Sources: FactSet, Renaissance Capital, The Wall Street Journal

3

Strategic & Private Equity Buyers Maintain Historic Levels of Buying

Power Despite Significant M&A Activity

Although acquirers continued to aggressively deploy capital in M&A transactions throughout 2015, strategic and private equity buyers maintain substantial purchasing power

- The aggregate cash balances of S&P 500 companies increased to a historical high of $1.44 trillion and the private equity community continued to fundraise at a significant pace

Credit markets remained robust throughout 2015 - 2015 leverage multiples were near pre-recession highs - Leverage multiples began to compress in large cap deals toward the end of 2015, but this contraction did not reach the middle market

S&P Cash Balances

($ in billions)

Strategic buyers remain flush with cash, as cash balances across S&P 500 constituents have increased every year since 2006

$1,410 $1,430 $1,440

$750

$760

$790

$960

$1,160 $1,210 $1,080

U.S. Private Equity Dry Powder

($ in billions)

U.S. private equity firms hold a significant amount of dry powder and must put it to work

$426

$539

$509

$501

$470

$474

$499

$530

$533

$543

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Sources: Pitchbook, Factset

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Average Leverage Multiples in Middle Market Leveraged Buyouts1

Middle market leverage multiples were strong throughout 2015

5.6x

4.7x

4.5x

5.3x 5.3x

4.2x

4.3x

4.5x

4.8x

3.3x

2015 Snapshot

5.9x 5.6x 5.0x 5.0x

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

(1) Expressed as a multiple of EBITDA Source: S&P LCD

Q1

Q2

Q3

Q4

4

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